This paper compares public and private funding of higher education taking into account the hierarchical nature of the educational system and also the fact that parents always have the possibility to complement public education with private expenditures in individual tutoring. Thus, I consider that, it is possible to gain access to higher education by complementing public funding of basic education with private tutoring.            There is a consensus in the literature that public funding of higher education implies a redistribution of income from poor to rich people, or as Epple and Romano (1996a) write it, from the ends (both poor and rich) to the middle. There are now many papers that use a Political Economy approach to study how this may be the result of the political process. Here I follow Gloom and Ravikumar (2003) approach, who take policy as given and look at its implications.            Agents are heterogeneous in what refers to their level of human capital, which I take to be equal to income and also to the ability with which they are born. The utility of a given agent depends on own consumption and on the level of human capital of his child. The level of human capital of the child depends on the parent's level of human capital, on the child ability, and on the average human capital in the economy. Agents decide to send, or not to send, their children to University depending on the private cost of the University, on their income level and also on the children ability.

It is obtained that although public funding implies larger access to higher education it always implies a decrease on welfare to at least some agents. Moreover, it is shown that the marginal agent to access university would always prefer a pure private funding system. Thus, when studying the welfare effects of public funding for higher education, we cannot identify gaining access to University with an increase in welfare.            Moreover, the consideration of private tutoring implies that with public funding private agents will tend to invest too much in both basic and higher education, as they do not take into account the social costs of higher education.            Finally, I propose and analyse a different funding system where only those that send their children to university support the funding of higher education.